Shares of Foot Locker (FL -4.62%), a retailer of footwear and apparel, rose as much as 12% in early trading on May 20. The big story was the company's first-quarter 2022 earnings update, which was far more positive than it looked when you dig below the headline numbers.
Foot Locker reported sales of $2.175 billion in the first quarter of 2022, up a tiny 1% year over year. Same-store sales dropped 1.9%, with management highlighting particular strength in its apparel business relative to footwear. That's notable because the company has been dealing with Nike, historically a key supplier and one of the largest footwear brands on earth, shifting toward selling more of its products through its own sales channels. In other words, although Foot Locker's numbers seem a little light, they suggest that the company is actually navigating a material headwind quite well as it looks to broaden its assortment.
On the bottom line, Foot Locker reported adjusted earnings of $1.60 per share, down from $1.96 in the year-ago quarter. The company noted inflationary pressures as a key part of the year-over-year decline, which has been a major concern among investors. But analysts had been calling for $1.47, so Foot Locker actually beat by a wide margin. That's the type of thing that investors like to see, even though sales were just a little below the consensus call.
Even more impressive, while many other retailers have been curtailing their outlooks, Foot Locker reaffirmed its full-year 2022 guidance. More than that, however, it said it now expects sales and earnings to be at the high side of the range it has provided. That said, both of those numbers call for year-over-year declines, so perhaps the retailer is just doing relatively well compared to other retailers. However, in today's increasingly uncertain operating environment, that appears to have been more than enough to get investors excited.